Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. exercise #2: (keep or drop a segment) g company ha

Exercise #2: (Keep or Drop a Segment) G Company has three stores known as Big,...

80.2K

Verified Solution

Question

Accounting

Exercise #2: (Keep or Drop a Segment) G Company has three stores known as Big, Medium, and Small respectively. Total Sales from the three stores were $1,500,000 this last year. Information from the accounting information system on recent performance is as follows:

Big Medium Small
Sales

25,000 units @ $30 = $750,000

(this is 50% of company sales)

18,750 units @ $32 = $600,000

(this is 40% of company sales)

3,750 units @ $40 = $150,000

(this is 10% of company sales)
Big Medium Small
Variable cost per unit $24 $24 $36
Traceable Fixed Cost (Advertising) $20,000 $10,000 $5,000
Allocated Companywide Fixed Cost $69,000 $55,200 $13,800
($138,000 total allocated by sales 50%, 40%, 10%)

REQUIRED:

(a) Prepare G Companys Segment Margin Income Statement with a column for each subunit, and a fourth column to Total for the entire company.

(b) Then write a sentence telling whether Small store should be closed or not.

(c) Then write several sentences explaining why or why not it should be closed AND what the relevant dollar amount change in total company income would be if it was closed.

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students